3M Co.'s (MMM) second-quarter earnings fell 17% on lower demand, but the diversified manufacturer's results exceeded expectations and the company firmed its earnings outlook for 2009.

The company's cost-reduction strategies and improved demand for 3M components used in consumer electronics products and face masks to combat the spread of the H1N1 virus bolstered results in the quarter.

3M, which makes thousands of products ranging from Scotch tape and Post-It notes to furnace filters and power lines, said its restructuring activities in the quarter included reducing its work force by about 1,600 employees, who were either laid off or opted for early retirement in the second quarter. Another 1,200 workers were cut in the first quarter.

"The benefits of these actions are really starting to impact results," said Patrick Campbell, chief financial officer, during a conference call with Wall Street analysts Thursday.

The St. Paul, Minn., company raised its full-year earnings forecast to $4.10 to $4.30 a share, compared with its view in April for earnings of $3.90 to $4.30 a share. The company also tightened its 2009 forecast for sales excluding revenue from acquisitions and currency value fluctuations. The company now sees organic sales declining by 10% to 13% from 2008. It had previously expected a decline of 11% to 15%.

Chairman and Chief Executive George Buckley reiterated his prediction from April that the economic recession in the U.S. is either at or close to reaching a bottom.

"All the evidence that we've seen continues to support that view," Buckley said. He added that Asia, particularly China, will be the first geographic region to recover, while Europe will be the last to rebound.

Nevertheless, Buckley cautioned that 3M is still facing a challenging sales environment with no meaningful improvement in demand yet from several major industrial customers, particularly the automotive industry and the construction sector. He added there is a risk that recent upticks in orders could be a "false dawn" caused by an over-correction in inventory levels earlier this year by 3M's customers rather than a sustainable recovery in demand.

"The green shoots are certainly there, but we just want to make sure they're not weeds," Buckley said about the sales-growth indications he's seen.

Second-quarter sales were lower from a year ago in all of the company's major business lines and in all of 3M's geographic markets.

The company's second-quarter earnings fell to $783 million, or $1.12 a share, from $945 million, or $1.33 a share, a year earlier. Excluding items such as restructuring-related expenses, earnings dropped to $1.20 from $1.39. Revenue fell 15% from a year ago to $5.7 billion.

Analysts polled by Thomson Reuters expected per-share earnings of 94 cents on revenue of $5.41 billion.

3M's stock was recently trading up 4.7% at $67.70.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

(Melissa Korn and Tess Stynes contributed to this report.)